The
debenture rate is 3.15% but note rate is 3.20% and effective yield is a whopping
5.232%.

________________________________________________

AHEAD
OF THE YIELD CURVE

So
what is the difference between moderate and modest?

The
Federal Reserve announced at its last
meeting on monetary policy that “Information received since the Federal Open
Market Committee met in June suggests that economic activity expanded at a
MODEST pace during the first half of the year.”

The
announcement prior to that had stated “Information received since the Federal
Open Market Committee met in May suggests that economic activity has been
expanding at a MODERATE
pace.”

So
the economy expanded at a MODEST pace. It had been expanding at a
MODERATE pace.

That’s
one way to describe it. According to the Department of Commerce, gross domestic
product, the value of all goods and services produced, rose at a 1.7 percent
annualized rate from April through June following a 1.1 percent gain in the
first three months of the year. The first-quarter’s reading was revised down
from a previously reported 1.8 percent advance.

For
all of 2012, GDP was revised to show a 2.8 percent increase compared with a
prior estimate of 2.2 percent.

Here
is what GDP has been doing and this week’s interesting little table of
data:

2nd
quarter 2013 1.7%

1st
quarter 2013 1.1

4th
quarter 2012: 0.1%

3rd
quarter 2012: 2.8%

2nd
quarter 2012: 1.2%

1st
quarter 2012: 3.7%

4th
quarter 2011: 4.9%

3rd
quarter 2011: 1.4%

2nd
quarter 2011: 3.2%

1st
quarter 2011: (1.3)%

4th
quarter 2010: 2.8%

3rd
quarter 2010: 2.8%

2nd
quarter 2010: 3.9%

1st
quarter 2010: 1.6%

4th
quarter 2009: 3.9%

3rd
quarter 2009: 1.3%

2nd
quarter 2009: (0.4)%

1st
quarter 2009: (5.4)%

The
third quarter has also started out at a modest pace.

Employers
added only 162,000 jobs in July and job gains for May and June were revised down
by a total 26,000. May's gains were revised to 176,000 from 195,000 and June's
to 188,000 from 195,000.

So
what does this mean?

I
don’t know.

Keep
your eyes and ears open for this week’s auction of 30 year Treasury bonds. At
last month’s auction, the U.S. sold $13 billion in 30-year
bonds at 3.66% the highest yield in almost two years. The June auction had
drawn a yield of 3.35% while the May auction saw a yield of only 2.98%.

Thirty-year
bond yields are now around 3.70%, after touching 3.78% last week, the highest
since August 2011.

The
difference between two- and 30-year yields increased to 340 basis points. The
slope of the yield curve—the difference between the yields on short- and
long-term maturity bonds—has achieved some notoriety as a simple forecaster of
economic growth. A steep curve indicates strong
growth.

__________________________________________OFF
BASE

So
what is the difference between moderate and modest?

The
word moderate comes from the Latin moderātus which
means to restrain or control. The word modest comes from the Latin modestus
which means restrained or decorous.

So based upon the
etymology of the words, modest means you are restrained while moderate means you
have to restrain yourself.

To put it another
way, you are a slow runner (modest) rather than running slow. Moderate implies
that it is deliberate while modest is just the way it is. So I think what the
Fed is saying is that the economy is crawling along despite its efforts while a
month ago it was saying it was crawling along thanks to its
efforts.

Am
I getting carried away? Should I remember “moderation in all things?” That’s
from the Bible right? WRONG. There
is absolutely NO direct quotation matching that proverb.

The
phrase, “Moderation in all things,” is common extrapolation of Aristotle’s
Doctrine of the Mean as presented in his Nicomachean Ethics. His ethic works
around finding the mean, or middle ground, between excess and deficiency. An
example of this would be his presentation of courage being the happy medium
between the extreme of rash action and the deficiency of cowardice, in respect
to a person’s possible action in the face of
danger.

It
should be noted that Aristotle’s ethic is often misunderstood by its summary:
moderation in all things. It is frequently reasoned by those unfamiliar with
context that the common phrase means that a person should approach all things
(whether healthy or unhealthy) with moderation; therefore, reasoning that a
moderate amount of a bad thing can be indulged is not uncommon to find. This is
an inaccurate representation of the perspective summarized in the popular
phrase.